Will Apple’s iPhone Business Return To Growth This Year?

Apple’s (NASDAQ: AAPL) revenue growth over the last 2 years has been driven primarily by its services and other products division, which includes sales of the Apple Watch and Airpods, while its flagship iPhone business has remained almost flat due to a mixed performance of devices such as the iPhone XS and XR. However, things look set to change in FY’20, driven by strong demand for the lower-priced iPhone 11 and the meaningfully upgraded 11 Pro devices and the potential launch of a range of 5G handsets later this year. In this analysis, we take a closer look at the revenues of Apple’s key segments over the last few years and what the outlook could be like and also compare the company’s revenues with rivals.

Revenue growth of about $30 billion over two years driven primarily by the contribution from Services and Other Products Business

iPhone Revenues grew modestly from $141 billion in 2017 to $142 billion in 2019 and are likely to grow 6% to $151 billion in 2020.

iPhone is the biggest driver of Apple’s revenues, accounting for ~55% of total revenue in FY’19.

Sales rose from $141.3 billion in FY’17 to $166.7 billion in 2018, driven by higher pricing on flagship devices, although it fell to $142.4 billion in 2019.

We expect iPhone revenues to grow to $151 billion in 2020, as Apple is expected to launch a range of 5G devices this year.

Services Revenues grew from $30 billion in 2017 to $46 billion in 2019 and are likely to grow 17% to $54 billion in 2020

Services are the second largest and one of the fastest-growing segments for Apple, accounting for close to 18% of revenue.

Services revenues grew from $30 billion in 2017 to $46 billion in 2019, driven by higher sales from the App Store and a higher number of subscriptions to Apple and third-party services (for which Apple takes a commission).

Services revenues are likely to grow 17% to $54 billion in 2020.

Other Products Revenues grew from $13 billion in 2017 to $24.5 billion in 2019 and are likely to grow 30% to $32 billion in 2020

The Other Products segment, which includes revenues from the sales of the Apple Watch, Airpods, and other products is Apple’s fastest-growing segment.

Revenues grew from $13 billion in 2017 to $24.5 billion in 2019, driven by higher sales of the Airpods and the launch of upgraded Apple Watch models.

Revenues could grow by 30% in 2020 to about $32 billion, driven by the new Airpods Pro wireless earphones and the Apple Watch Series 5.

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